Mega contractor sees prices, and buildings, collapsing

Roni Mizrachi predicts drop of up to 25% in prices by fall, says retrofitting buildings for earthquakes will prove ineffective

By ORI CHUDY/GLOBES
June 27, 2011 22:59
3 minute read.
Palestinian workers build Kedumim settlement home

Palestinian workers build settlement home in Kedumim 58 (R). (photo credit: REUTERS/Nir Elias)

Talk of a slowdown at contractors’ sales offices is becoming grounded in official figures. The Central Bureau of Statistics has reported a steady drop in home sales in recent months. Remarks by contractors and developers this week further highlight the difficulties at their sales offices, and may signal a halt in the rise in prices.

Roni Mizrachi, owner and CEO of Mizrachi & Sons Ltd., which has been in business for over 40 years, agrees that buyers are now waiting, in the belief that prices will likely fall in the not-too-distant future. He also offers pessimistic forecasts about building retrofitting plans against earthquakes.

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Mizrachi & Sons is currently building hundreds of apartments in Haifa, Jerusalem, Tel Aviv, Netanya, Hod Hasharon, and Holon.

“We don’t build in the periphery, and we won’t go and build there,” Mizrachi said.

“Outside the first and second rings in central Israel, it’s risky. The moment there is a security or economic problem, those are the places hit first.”

Mizrachi added, “There is now a slowdown in apartment sales. I believe that it will last through September. There is uncertainty, too much information about measures of one kind or another, and people are confused. But in September, everyone will wake up and again start buying apartments... at the same time, I believe that prices will fall in some cities. I expect prices to fall by 5-10 percent in Tel Aviv, Yavne, Pardess Hanna, and Hadera. I expect prices to rise by 3-5% in Hod Hasharon, Rishon LeZion, Holon, and Jerusalem. Haifa will remain unchanged because there will be a drop in demand alongside a drop in supply, but Ashkelon and Beersheba will get hit with the steepest price falls because of the security situation.”

Asked by Globes about the secondhand housing market, Mizrachi said “There is a bubble in the second-hand housing market. Unquestionably.

The difference between a new and second-hand apartment should be around 25%. Current prices do not come near this and are unrealistic. The second- hand housing market will see a drop in prices of 20-25% within six months. I’m talking about the center of the country; this market has already stagnated in the periphery.”

Asked about his current development plan under these circumstances, Mizrachi said “We made deals until now, but we’ve stopped. Land prices have peaked, and we should see where the market is headed, and not take risks. Contractors will now wait, sell what they have, and not start new projects. Where apartment prices begin to fall, land prices will also come down.”

What is your opinion about National Outline Plan 38 - Earthquake Reinforcement and Retrofitting? “It’s not something I’ll go into. I don’t believe that it’s possible to add 120 tons onto the roof of a building and for everything to be fine. This plan is like taking an elderly woman, giving her a facelift, and saying that she’s young. It’s all cosmetic.

The moment the first building collapses, the entire program will be halted that day.

And I maintain that it will happen. There are already buildings that have been retrofitted and are leaning sideways. The solution for urban renewal is to vacate and build new projects. This maximizes land use, increases the number of housing units, and improves the current residents’ standard of living. We’re about to start several vacate-and-building projects in Or Yehuda.”


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